As paltry returns are criticised, do savers have unrealistic expectations about the rates banks can offer?

People do not have the confidence to switch or invest in well managed, higher growth assets (Source: Getty)

Frances Coppola, a former banker blogging at, says Yes

Since the financial crisis, banks have been under pressure to increase stable funding and reduce reliance on money that can run. This not only means using less wholesale funding, it also means persuading retail customers to tie up money in notice accounts, minimum balances or term deposits.

Savers may prefer to hedge their bets by putting their money into easy access savings accounts or current accounts, but they should not expect to receive positive returns on these accounts. Banks do not want or need this money.

Indeed, none of us should want savers compensated for leaving savings in easy access accounts. We want a stable financial system. That means reducing the risk of bank runs.

Banks have increased their capital levels and are funding on a more long-term basis than before the crisis, which makes for more stability. Savers should not undermine their efforts by demanding high interest rates on easy access accounts.

Carlton Hood, customer director at Old Mutual Wealth, says No

It is not unrealistic for consumers to expect a reasonable return on their savings. Banks and building societies certainly need to offer savers the best rate possible, and should not be profiting from consumer apathy.

The issue is that, while people want a return on their savings, they are choosing cash not for the returns on offer but for security. They want their money to be safe and do not have the confidence to switch or invest in well managed, higher growth assets.

The investment industry needs to provide better information, more advice and a clear commitment to customers’ best interests, to persuade cash investors that they can get a better return on their money. Savers expectations are not unrealistic, but there is fear about taking control and moving money to access better returns.

The financial regulator is taking steps to encourage people to do just that in order to promote competition. By addressing this issue we can improve our savings culture for the better.

Related articles